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3 Cybersecurity Stocks Wall Street Predicts Will Rally 30% - 55%

The increasing number of cyber breaches worldwide and the growing demand for cybersecurity is driving the industry’s prospects. Moreover, federal cyber-leaders are also underscoring the importance of cybersecurity. Amid this, Wall Street analysts see cybersecurity stocks SentinelOne (S), Crowdstrike (CRWD), and Datadog (DDOG) to rally between 30%-55% in the near term.

The constantly evolving cyber-threat landscape is becoming a significant challenge for organizations and the government. Federal cyber-leaders at the RSA conference stated that heightened cyber security had become the norm now. White House National Cyber Director Chris Inglis said that the Russia-Ukraine crisis and the ensuing war on cyberspace indicate that the U.S. agencies and industry leaders need to work together to mitigate cyber threats.

With the growing demand for cybersecurity, the rise in the number of worldwide data breaches, and technology’s rapid progression requiring more secure business models, the global cybersecurity market is expected to reach $346 billion by 2027, expanding at a 13.4% CAGR.

Given this backdrop, Wall Street analysts expect the cybersecurity stocks SentinelOne, Inc. (S), CrowdStrike Holdings, Inc. (CRWD), and Datadog, Inc. (DDOG) to rally between 30% to 55%.

SentinelOne, Inc. (S)

S is a cybersecurity company operating globally. The company’s AI-enabled extended detection and response (XDR) platform provides autonomous cybersecurity defense while its distributed AI models run on every endpoint, cloud workload, and its cloud platform.

On June 8, S unveiled SentinelOne Skylight, which is expected to unify security and enterprise data in a singular view for understanding and autonomous action. Skylight enables security teams to observe all security events, thereby increasing efficiency. A day earlier, S announced Singularity Vulnerability Mapping, which provides security teams with autonomous scanning capabilities to gain visibility across the enterprise network and remediate threats. These new offerings might benefit the company.

On June 2, S announced a new integration with Inc.’s (AMZN) Amazon Web Services (AWS) Security Hub. The SentinelOne integration is expected to enable organizations to defend cloud workloads effectively by gaining centralized insights.

S’ revenue increased 109.3% year-over-year to $78.26 million in the fiscal first quarter ended April 30. Cash, cash equivalents, and restricted cash balance came in at $769.08 million, up 110% from the same period last year. Non-GAAP gross profit improved 167.7% from the prior-year quarter to $53.51 million.

The consensus revenue estimate of $405.91 million for the fiscal year ending January 2023 indicates an increase of 98.2% from the prior year. Likewise, the consensus EPS estimate for the same year reflects a 20% year-over-year improvement.

The stock has gained 2.1% over the past five days to close yesterday’s trading session at $25.69.

Of the 17 Wall Street analysts rating S, 13 rated it Buy, and four rated it Hold. The 12-month median price target of $36.76 indicates a 43.1% potential upside. The price targets range from a low of $25.00 to a high of $54.00.

CrowdStrike Holdings, Inc. (CRWD)

CRWD operates as a cloud-delivered protection provider across endpoints and cloud workloads, catering to Falcon platforms and cloud modules. The company’s offerings include threat intelligence, managed security services, threat hunting, Zero Trust identity protection, and log management.

On June 6, CRWD introduced CrowdStrike Asset Graph, a new graph database that helps organizations see assets and their interactions and make informed decisions about them. On the same day, the company introduced Humio for Falcon, a capability that extends data retention of CrowdStrike Falcon telemetry for one year or longer. The new solution offerings might bolster the company’s revenues.

In the fiscal first quarter ended April 30, CRWD’s total revenue came in at $487.83 million, up 61.1% year-over-year. Non-GAAP income from operations rose 178.7% from the prior-year period to $83 million. Non-GAAP net income attributable to CRWD and non-GAAP net income attributable to CRWD common shareholders improved 221.4% and 210% from the same period last year to $74.79 million and $0.31.

Analysts expect CRWD’s revenue for the fiscal year ending January 2023 to come in at $2.20 billion, which indicates a 51.8% year-over-year growth. Street expects EPS for the same period to improve 79.3% from the prior year to $1.20. Moreover, CRWD has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.

CRWD has gained 14.1% over the past three months and 8.5% over the past month to close yesterday’s trading session at $178.84.

23 Wall Street analysts rating CRWD have rated it Buy. The 12-month median price target of $236.87 indicates a 32.5% potential upside. The price targets range from a high of $315.00 to a low of $200.00.

Datadog, Inc. (DDOG)

DDOG offers a monitoring and analytics platform for developers, IT operations teams, and business users in the cloud internationally. The company provides a SaaS platform that integrates and automates infrastructure monitoring and security monitoring.

In May, DDOG announced the general availability of its OpenTelemetry Protocol (OTLP) support in the Datadog agent, which brings the full monitoring capabilities of the Datadog platform to OpenTelemetry-instrumented applications. This new capability should add to the company’s revenue.

Earlier in May, DDOG entered into a definitive agreement to acquire security-testing software provider Hdiv Security. Pierre Betouin, VP of Product, Cloud Security Platform at DDOG, stated, “Adding Hdiv Security’s capabilities to Datadog’s Cloud Security Platform will deepen security visibility across the entire software life cycle to help our customers develop more secure and resilient applications.”

DDOG’s revenue increased 82.8% year-over-year to $363.03 million in the first fiscal quarter ended March 31. Non-GAAP operating income and non-GAAP net income came in at $83.68 million and $83.84 million, up 327.9% and 316.1% from the prior-year period. The company’s non-GAAP net income per share increased 300% from its year-ago value to $0.24.

Street expects DDOG’s revenue to increase 62.5% year-over-year to $379.48 million for the current quarter (ending June 2022). Street EPS estimate for the same quarter of $0.15 reflects a rise of 62.1% from the prior-year quarter. Additionally, DDOG has beaten consensus EPS estimates in each of the trailing four quarters, which is impressive.

DDOG’s shares have gained 16.1% over the past year to close its last trading session at $107.35.

Of the 20 Wall Street analysts rating the stock, 17 have rated it Buy, while three have rated it Hold. The 12-month median price target is $164.72, which indicates a 53.4% potential upside. The price targets range from a low of $125.00 to a high of $223.00.

S shares fell $24.41 (-100.00%) in premarket trading Friday. Year-to-date, S has declined -51.65%, versus a -15.22% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.


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